Biden Administration Seeks to Reinstate its Student Debt Relief Plan

The Biden administration is seeking to appeal to the U.S. Supreme Court to reinstate the president’s student debt cancellation plan, which could provide financial relief to millions of student loan borrowers.

The president’s student loan cancellation plan has hit setbacks in recent weeks, as two federal judges have blocked the plan, deeming it unconstitutional. The Justice Department is seeking to override both rulings and allow the legislation to take effect. The Biden administration is planning to appeal one of the federal rulings through an appeals court in St. Louis, and announced it is willing to appeal the other ruling if necessary.

Biden’s plan would offer up to $10,000 of relief for student loan borrowers with annual incomes below $125,000, or households with annual earnings below $250,000. Pell Grant recipients, which typically come from the most financially-disadvantaged backgrounds, would be eligible for an additional $10,000 in aid, totaling $20,000.

In a recent filing, the administration argued that keeping the president’s student loan forgiveness plans on hold would leave the government with an “unnecessarily perilous choice,” as millions of borrowers would be saddled with debt that was promised to be forgiven. In such a scenario, the administration may be forced to extend the payment pause on student loan payments that is currently in effect until Dec. 31. Another extension would result in billions of dollars of lost revenue for the federal government.

For borrowers, monthly payments could be $200 to $300 higher should the administration’s student loan forgiveness plan fail to pass. Default rates have already increased by twenty-fold since the start of the COVID-19 pandemic, and could soar further in such a scenario.

An estimated 26 million borrowers had already applied to have part of their student loans forgiven before the federal ruling blocking the plan took effect. As a result, the Education Department stopped processing and accepting new applications last week, immediately after the federal ruling was issued. In total, over 40 million borrowers may be eligible for relief if Biden’s student debt cancellation plan is approved.